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Industry News

Risk Management Industry News for FCA Regulated Businesses

Social Media Benefits and Risks

Posted by Serina Gill on 02-Aug-2017 09:00:00 in Risk Manager, social media

shutterstock_277866641-088914-edited.jpgManaging risk in social media is a challenging task. With little regulation, it continues to spread fake news, can prove a gold mine for identity fraudsters and is far too much of a distraction in the workplace.Just some of the risks to businesses include: 

  • Defamatory comments
  • Spreading misinformation
  • Hacking
  • Data theft
  • Brand/reputational damage

 Yet, for all the negatives, there are also many exciting positives. The sheer numbers using social media – it is said to be around a quarter of the world’s population – means vast numbers can be reached via marketing. A post from a satisfied customer can prompt a flood of goodwill – and new business. What is more, data on an unprecedented scale is now at hand and this can produce extremely valuable intelligence.

Facebook privacy issue

The message for financial services companies however is that the data offered by social media is not simply there for the taking. Last year, Admiral Insurance found this to its cost, when it tried to launch a motor policy, using information from social media posts.

The policy, called Firstcarquote, was aimed at young drivers and the intention was to use social media data to gauge personality types – those deemed to be more cautious, for example, would be seen as safer and would benefit from more competitive premiums.

But, Facebook objected and said the insurer was breaching privacy rules. As such, the policy could only launch with ‘reduced functionality’. This meant customers could log in to the product via Facebook and be verified through this, but their data would not be analysed.

Notably, Facebook’s policy says that its data cannot be used to make “decisions about eligibility, including whether to approve or reject an application or how much interest to charge on a loan.”

This clearly impacts on insurers and payday loan providers, for example, and risk managers must ensure that those in product design are well aware of the parameters.

Combating fraud

But that is not to say that social media data cannot be used in other ways. It is known that some involved in counter fraud activities use social media extensively. For example, if an Instagram account showed someone on holiday, yet they said there were at home when making a claim, it raises suspicions.

Insurance fraudsters are known to typically form networks, with associates staging fake car accidents or burglaries. There have been cases where a fraudster has hired a minibus, arranged for complicit passengers to travel in it, and then deliberately had an accident, resulting in a spate of claims for whiplash and other injuries.

W

hile some can be clever at covering their tracks, many fraudsters have failed to realise that a group of family members or Facebook ‘friends’ will be spotted by those making investigations and can certainly help in framing some tough questions.

However, there can be no short cuts and the onus is on the insurer to prove the claim is not genuine. Proper evidence will always be required and social media can only be a part of the counter fraud team’s armoury.

Using data to shape strategy

When working with something as vast as social media data, risks managers must also ensure there is a joined-up approach from across the business as there can be dangers if some aspects of a business are seeing data in isolation.

So, if there are employees tasked with managing the Twitter feed, for example, and they are seeing complaints about a particular product or service aspect, there may be broader aspects that need addressing. Are they simply fire fighting or are they ensuring that the issues are properly analysed and reaching senior management?

For many, social media can pose business critical risks and risk managers must ensure they have the sufficient resource and the right monitoring tools to allow their business to access the benefits, but also see that governance is given the highest priority.

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